Good news for owners as prices show signs of recovery

Nationally over the month of May, dwelling values saw a decline of 0.4 of a percentage point, capital cities declined 0.4 of a percentage point, and regional areas saw a decline of 0.2 of a percentage point.

For the national values, this was the smallest month-on-month decline since May 2018.

Capital cities

According to Tim Lawless, head of research at CoreLogic, this decline slowdown was helped mainly through Sydney and Melbourne.

“This improvement is primarily being driven by a slower rate of decline in Sydney and Melbourne where housing values were previously falling at the fastest rate of any capital city,” Mr Lawless said.

“Sydney values were 0.5 of a percentage point lower over the month, while Melbourne values were 0.3 of a percentage point lower, the smallest decline in values across both cities since March last year.

“In other cities, where housing market conditions have generally been more resilient to a downturn, the trend is opposite.”

Darwin led the capital city declines, recording a fall of 1.6 per cent over the month. This was followed by Perth with 1 per cent, Brisbane of 0.5 of a percentage point, Hobart with 0.4 of a percentage point and Canberra with 0.2 of a percentage point.

Meanwhile, Adelaide recorded a value rise of 0.2 of a percentage point, the only capital city to record a value rise.

Regional centres

All of NSW’s major regional centres recorded declines in values over the year to March 2019, with Illawarra dropping the most for houses at 10.1 per cent and the Newcastle and Lake Macquarie regions seeing unit values fall 9.4 per cent, while Richmond - Tweed saw the least severe declines at 1.3 per cent for house values and 1.9 per cent for unit values.

In Queensland, not all of the major regional centres recorded declines in values over the last 12 months to March 2019, with Wide Bay recording a rise in house values of 0.7 per cent and the Sunshine Coast recording a rise in unit value of 4 per cent. Townsville, however, recorded the largest declines for both house and unit values at 4.8 per cent and 13.5 per cent, respectively.

Regional Victoria saw notable value rises, with major centres Geelong and the Latrobe - Gippsland areas both recording rises in house and unit values over the year to March 2019, with Geelong recording rises of 0.4 of a percentage point and 5.4 per cent, respectively, and the Latrobe - Gippsland areas recording rises of 5.9 per cent and 7.9 per cent, respectively.

Western Australia’s major regional centre of Bunbury recorded declines over the last year to March 2019 in both house and unit values, declining 4.1 per cent and 19.5 per cent, respectively.

An improvement was also seen in auction clearance rates over the month, with the last week of May seeing a clearance rate over 60 per cent for the first time in 12 months, and Melbourne has maintained about 60 per cent for the last three weeks.

“Although clearance rates remain low relative to several years ago when housing market conditions were much stronger, the improved performance at auction aligns with the easing rate of decline,” Mr Lawless said.

On the whole, the most expensive quartile of the market has been experiencing larger losses than the most affordable quartile, with declines of 10.2 per cent and 1.5 per cent, respectively.

Canberra saw the largest growth in the upper quartile at 1.8 per cent, while Hobart saw the largest growth in the lower quartile at 7.7 per cent. Meanwhile, Melbourne saw the largest decline in the upper quartile at 13.3 per cent, while Darwin saw the largest decline in the lower quartile at 10.7 per cent.

Rent

Rents increased slightly over the last 12 months, with Corelogic’s hedonic rental index rising 0.4 of a percentage point. Over this time, Hobart experienced the largest increase in rents with a rise of 4.9 per cent.

In terms of gross rental yields, national figures have increase to 4.13 per cent over the last 12 months, with both regional NT and Darwin seeing the largest yields at 7 per cent and 6 per cent, respectively.

Nearly every capital city and regional location saw yields either hold steady or increase over the last 12 months, with the exceptions being regional NT and regional Tasmania, which both recorded declines.

Past the federal election, Mr Lawless has said a number of results have paved the way for positivity in the property market, namely the certainty of property taxation with a Liberal government, keeping commissions consistent for mortgage brokers, the Liberal government’s First Home Loan Deposit Scheme, APRA’s proposed lending changes and the prospect of future rate cuts.

However, tight credit conditions are keeping back the property market from experiencing a real boost, he said.

“Although interest rates and serviceability tests are set to reduce, lenders are continuing to [scrutinise] incomes and expenses much more intensely,” Mr Lawless said.

“Comprehensive credit reporting is providing lenders with greater visibility around borrower finances and overall debt levels, and progressively lenders are reducing their exposure to borrowers with high debt levels relative to their income.”

It was also important to consider the reasons why interest rates are being cut, he added.

“Policymakers are becoming increasingly concerned about prospects for economic growth and stubbornly low inflation,” Mr Lawless said.

“The labour market is seeing some cracks emerge and global trade tensions remain high. If the economy continues to lose momentum, we could see further weakening in labour markets and a continuation of weak wages growth.”